The latest Trump tariff threat, of course, is designed to facilitate conclusion of the trade negotiations. Talks are scheduled for Washington DC on Thursday. It is certainly possible that the impeding escalation of tariffs will concentrate minds once more, leading to a very speedy conclusion of talks. Or not. Either way, the coming few days promise more drama on the US-China front than trade watchers have seen in months-- a major escalation of the trade war will happen on Friday or a truce. A second notable set of events takes place early next week that will also help shape global trade for the future. Dueling meetings are scheduled for Geneva and New Delhi for May 13-15. The former is the setting for the first round of talks of what is called the “plurilateral” on e-commerce in the World Trade Organization (WTO). Not all WTO member countries have agreed to join negotiations on the topic, so only a subset of members (74 so far) will sit down to start.
Having negotiations just over rules will require flexibility by members because it will be much harder for members to return home and clearly point to “gains” from WTO changes. In many places, adjustments to specific provisions could even lead to short term challenges. But without any way to address legitimate demands by many members to more accurately reflect the situation in the global trade regime in 2018 and beyond, the system itself is under increasing threat. We have forgotten how important the WTO has become to the business world. It operates like air. It is only when it is missing that it becomes obvious how much it was needed. Without creativity and flexibility by all members, the WTO is at risk of evaporating. The focus ought to be on updating the global rule book, rather than increasingly carving up and out smaller and smaller bits of the economy to be tailored for various member interests.
This disconnect will need to be addressed. The global rule book is getting badly out of date. Current provisions do not match up well at all with the reality of how business is being done on the ground. While FTAs help, a patchwork of trade agreements is not the best way to address the needs of a dynamic sector of the economy. The WTO just announced that Argentina will host the next Ministerial round in late 2017. Member governments cannot show up a year from now and begin to put into place a few more small initiatives. It really is time for the global trade regime to get out of neutral and get back into gear.